China becomes Worlds Richest Country | Evergrande Crisis | Sohail khan

Hello, friends! China has become the richest country in the world.

You heard that right. According to a report, China has overtaken America to become the World's Richest Country. You'd think this is something to celebrate for the Chinese government and the Chinese people. But at the same time, many economic experts are pointing out that China may soon fall into a major economic crisis. How did this happen? And what is this looming economic crisis?

Come, let's find out in today's Article

First, what does it mean to be the richest country? Friends, you can understand it as 'wealth' basically. How do you measure how rich a person is? By evaluating the landholdings of the person, the total value of his properties, the businesses he owns, the machinery in the businesses, the total value of all these is used to calculate the total wealth of the person. This is different from the GDP. You can understand GDP to be the equivalent of the annual income of a person. The GDP of a country is the total value of goods sold in a country in a year. The value of goods as well as services. The total market value of all goods and services in a country. And the GDP can be divided into 3 main sectors. When we talk about the GDP, we need to account for the population of the country. Suppose a family earns ₹1,000 per month, and there are 2 children in the family. And there's a family earning ₹2,000 per month, but there are 10 children in the family. If the same amount of money is distributed among so many people, then they would get less per person. So even though the GDP of a country may be high,if the country has a high population as well, then it isn't admirable. That's why we calculate the GDP Per Capita,  hat's mainly the GDP per person. China has become the richest country in the world in terms of wealth. If you add up the wealth of every person in China's population, then it is the richest country in the world. But if we talk about GDP per capita, China doesn't stand anywhere near the top. If you look at the 2020 GDP Per Capita rank, China was at the 63rd rank.

And the USA was in the 5th position. Even if we talk about the overall GDP, the USA is much ahead as the #1 country in the world in terms of overall GDP. At approximately $21 trillion.

China comes in second place, at around $15 trillion. And at present, India is a $3 trillion economy. Despite lagging in both cases, China has overtaken the USA. In terms of overall national wealth.

According to the McKinsey Report.

This report was compiled after analysing the National Balance Sheet of 10 countries. Some other findings of this report revealed that the global wealth has tripled in the last two decades. From $156 trillion to now at $514 trillion. Exponential growth was seen in China's wealth. In 2000, about 20 years ago, China's wealth was $7 trillion. And today it has become $120 trillion. An increase of 17 times. During the same period, the total wealth of the USA increased 2x. Today it is at $90 trillion. This is the comparison of the overall wealth. Currently, China is at $120 trillion and the USA at $90 trillion. You might start to wonder in the year 2000, the USA was richer than China. And every year, the annual GDP of the USA has been more than China's. So how did China become richer than the USA? Even though the USA's GDP has been higher. The answer to it is very interesting. Friends, the GDP growth can be because of many things. Things that are useless actually. Imagine a country where people consume a lot of junk food; cold drinks and burgers. And the GDP of the country increases because of these. And after a person consumes so much junk food and becomes unhealthy, he may need to go to the hospital. He'll get a taxi to go to the hospital. He'll get treatment in the hospital and after his treatment, he'll get another taxi to get home. In the entire scenario, at every point, the GDP of the country increases. Eating junk food increases the GDP of the country. Riding in the taxi is increasing the GDP of the country. Even the hospital treatment is increasing the GDP of the country. Because money is exchanged at every point. Money is being transferred. But in this scenario, is there any overall increase in the wealth of the person?

No. There will be no overall benefit. Junk food is consumed. The taxi ride is over. And after the treatment, there's no more value. Now compare this to a country where the GDP is increasing mostly because of constructing new buildings, building new highways, because of new construction, new factories being set up. In the second country, the wealth would also increase because all of these is increasing the wealth. And broadly speaking, this is the difference between the USA and China. If I have to base this on data and statistics, then look at the comparison between the USA and China. The contribution of the service sector and industries of both countries to its GDP.

The service sector in China is at 54.5% and the contribution of the industries is at 37.8%. On the other hand, the service sector of the USA contributes 77.3%. And only 18.2% of the contribution is from the industries. I explained this same difference with the example. Eating junk food, using taxi services, healthcare services, are all services. They come under the service sector. And new construction comes under industries.